Petty cash book

Meaning of Petty Cash Book

A petty cash book can be defined as the book that is used to record expenses that are described as minor. The petty cash book is always kept by a petty cashier, who is in charge of making small cash payment.

It is used to record items of expenditure like postage, transport, stationary, transport fares, etc are first recorded in the petty cash book.

The petty cash book is a formal summarization of petty cash expenditures, sorted by date. In most cases, the petty cash book is an actual ledger book, rather than a computer record. Thus, the book is part of a manual record-keeping system.

There are two primary types of entries in the petty cash book, which are a debit to record cash received by the petty cash clerk (usually in a single block of cash at infrequent intervals), and a large number of credits to reflect cash withdrawals from the petty cash fund. These credits can be for such transactions as payments for meals, flowers, office supplies, stamps, and so forth.

A somewhat more useful format is to record all debits and credits in a single column, with a running cash balance in the column furthest to the right, as shown in the following example. This format is an excellent way to monitor the current amount of petty cash remaining on hand.

Uses of petty cash book

The petty cash book is used for the following

1. It is used to record small amount of cash kept in the office for minor day to day use.
2. Petty cash book maintains records of all petty payments systematically.
3. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly.
4. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.
5. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions.

Importance of keeping a petty cash book

1. It allows for proper recording
2. It makes the task of cashier easier as items of expenditure are summarized, the balance is later transferred into the cash book.
3. It gives the chance of minor expenses to be paid for immediately instead of waiting for the casheir

Importance of Petty Cash

Petty cash are the small funds available all the time in your office cash box for meeting miscellaneous or emergency expenses during or after banking hours. Petty cash is of very high importance as certain immediate expenses come up for example someone gets hurt to provide immediate medication when senior managers are not available in the office. For the small office service materials. For any petty job where payment by check is not acceptable by the vendor.

Test and Exercise

1. Define petty cash book.
2. State the importance of petty cash book.
3. What are the uses of petty cash book?